Mike Greenlar / The Post-Standard, 2006National Grid, which has requested a $400 million rate hike, used proceeds from Upstate New York utility customers to help pay for executives to ship wine and a cat to the United States and pay for an employee's two children to attend private school in Boston.

Syracuse, NY -- Proceeds from Upstate New York utility customers helped to pay $1,254 for a National Grid executive to ship his wine collection across the Atlantic, $3,566 to repair another executive’s washing machine and pool cover on Long Island, and $35,700 to send a third employee’s children to a private school in Boston.

National Grid had sought to include those expenses in rates, beginning in 2011.

After state officials questioned the expenditures, National Grid this week offered to slash $4.27 million from its rate proposal in hopes of putting the matter to rest. Utility officials said they don’t want the controversial expenses to derail the rate case.

“There are clearly other major issues in this case that we want to move forward with, so the decision was made to pull those costs out,” said Steve Brady, speaking for the company.

Footing the bill

In 2008 and 2009, National Grid billed its Niagara Mohawk division for at least 30 percent of the following expenses. National Grid's other utilities in New England and Downstate New York also paid a share.

$35,700 to send an employee's two children to a private school in Boston

$8,440 for a departmental holiday cocktail party

$3,566 to repair an employee's washing machine and pool cover

$1,254 to ship a British executive's wine collection to the U.S.

$1,208 to ship a British executive's cat to the U.S.

$668 for 48 mini-flashlights as thank-you gifts to employees

$580 for picture frames for three large maps for executive's wall

$233 for a rabies test for an employee's cat

$8 for tips during a train ride

Most of the expenses involved costs incurred by National Grid’s executives and by its British employees working in the United States.

National Grid’s current electric rates were set in 2002 and do not include any allowance for expenses of British expatriates working in the U.S., according to officials at the state Public Service Commission.

But in the past few years, National Grid has encouraged British employees to take assignments in America, and the company covers their moving and living expenses. The expenses are then apportioned to Grid’s utility subsidiaries on a prorated basis. The Niagara Mohawk subsidiary that serves Upstate typically picks up 15 to 40 percent of the bill.

The company has reimbursed its British employees in America for $1,200-a-month car leases, $4,200-a-month homes, medical expenses, plumbing repairs and other items.

Among the charges: $547 for prescription skin cream, $375 for snowplowing and $58.50 for a trip to the vet.

Besides expatriates, U.S. officers and directors of National Grid also submitted expenses that raised eyebrows at the PSC. Among the items: $8,440 for a company party, $690 for fleece jackets to thank employees, and $1,600 to frame 11 pictures for an executive’s office.

Utility customers’ payments were used to cover the costs. But the controversial expenses have not caused rates to go up, because they were not accounted for in the 2002 rate agreement, PSC and National Grid officials said. They said the expenses reduced company earnings that would otherwise go to shareholders as profits.

One of the reasons National Grid cites for seeking a rate increase is that it has been unable to eke out more than a 5 percent profit from its Niagara Mohawk subsidiary. The company has asked for an 11 percent profit margin.

Mindy Bockstein, chair and executive director of the state Consumer Protection Board, said the discovery of National Grid’s expenses merits further investigation.

“It certainly causes us some concern,” she said.

Brady, of National Grid, said the utility’s profits have been pinched by the hundreds of millions it spends to maintain the electric grid — beyond what rates cover — not by $1.5 million in executive expenses.

Details about National Grid’s employee expenses first surfaced in Massachusetts, where the company is seeking a $106 million increase in natural gas rates. The Massachusetts attorney general’s office, which participates on behalf of consumers, obtained documents from National Grid that itemized the expenses of expatriates, officers and directors, and showed how the cost was allocated among Grid’s subsidiaries.

In response to the information, Attorney General Martha Coakley urged utility regulators in Massachusetts to audit National Grid’s expenses.

Drawing upon the information from Coakley’s office, staff accountants at the New York Public Service Commission also raised concerns about the expenses. National Grid’s agreement to cut $4.27 million from the rate hike removes the likelihood of passing the costs onto consumers in future rates.

That amount more than covers the controversial employee expenses, which totaled just $1.5 million. The utility’s reduction also includes the salaries and benefits for British employees working in the United States.

Brady said some of the questioned expenses were included in the utility’s rate hike by mistake. Others probably should be billed to ratepayers, he said.

National Grid promised to hire an independent consultant to review its policies for reimbursing employee expenses and relocation costs.

The Public Service Commission staff has raised larger issues about the way National Grid apportions expenses to its utilities. The staff points out that the relocation costs of employees working in Boston or on Long Island are sometimes billed mainly to Niagara Mohawk.

The PSC staff has called for a full investigation of the cost-sharing relationships between National Grid and its U.S. subsidiaries. Members of the Public Service Commission said they intend to investigate, and will consider the timing and scope of the investigation later this month.

National Grid has about 1.6 million electric customers in Upstate New York, and they account for 23 percent of the parent company’s business. About 7 percent of the British company’s business comes from its 500,000 Upstate gas customers.